"We had a very good third quarter with total revenue growth of 28% while at the same time driving improved leverage across all of our key financial metrics, as we remain committed to scaling the business," said Steve Beauchamp, President and Chief Executive Officer of Paylocity. "I was very pleased with the level of service provided to our clients during the busiest time of the year, as all of our operational teams worked proactively with our clients to ensure year-end tasks were completed timely and accurately."

Third Quarter Fiscal 2017 Financial Highlights

Revenue:

Total revenue was $90.3 million, an increase of 28% from the third quarter of fiscal year 2016.

Total recurring revenue was $86.4 million, representing 96% of total revenue and an increase of 29% from the third quarter of fiscal year 2016.

Operating Income:

GAAP operating income was $14.9 million, compared to an operating income of $6.2 million in the third quarter of fiscal year 2016.

Non-GAAP operating income was $21.7 million, compared to non-GAAP operating income of $11.4 million in the third quarter of fiscal year 2016.

Net Income:

GAAP net income was $14.8 million. This compares to a net income of $6.2 million for the third quarter of fiscal year 2016. Net income per share was $0.27 for the third quarter of fiscal year 2017 based on 54.0 million diluted weighted average common shares outstanding. Net income per share was $0.12 for the third quarter of fiscal year 2016, based on 53.4 million diluted weighted average common shares outstanding.

Non-GAAP net income was $21.6 million. This compares to non-GAAP net income of $11.3 million for the third quarter of fiscal year 2016. Non-GAAP net income per share was $0.40 for the third quarter of fiscal year 2017, based on 54.0 million diluted weighted average common shares outstanding. Non-GAAP net income per share was $0.21 for the third quarter of fiscal year 2016, based on 53.4 million diluted weighted average common shares outstanding.

Adjusted EBITDA:

Adjusted EBITDA, a non-GAAP measure, was $26.8 million compared to Adjusted EBITDA of $14.6 million in the third quarter of fiscal year 2016.

Balance Sheet and Cash Flow:

Cash and cash equivalents totaled $101.5 million at the end of the quarter.

Cash flow from operations for the third quarter of fiscal year 2017 was $27.9 million compared to $18.3 million for the third quarter of fiscal year 2016.

A reconciliation of GAAP to non-GAAP financial measures has been provided in this press release, including the accompanying tables. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Business Outlook

Based on information available as of May 4, 2017, Paylocity is issuing guidance for the fourth quarter and full fiscal year 2017 as indicated below.

Fourth Quarter 2017:

Total revenue is expected to be in the range of $73.1 million to $74.1 million.

Adjusted EBITDA is expected to be in the range of $5.3 million to $6.3 million.

Non-GAAP net income is expected to be in the range of $0.0 million to $1.0 million, or $0.00 to $0.02 per share, based on approximately 54.5 million diluted weighted average common shares outstanding.

Fiscal Year 2017:

Total revenue is expected to be in the range of $297.0 million to $298.0 million.

Adjusted EBITDA is expected to be in the range of $50.0 million to $51.0 million.

Non-GAAP net income is expected to be in the range of $31.0 million to $32.0 million, or $0.57 to $0.59 per share, based on approximately 54.5 million diluted weighted average common shares outstanding.

We are unable to reconcile these forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Conference Call Details

Paylocity will host a conference call to discuss its third quarter fiscal year 2017 results at 4:00 p.m. Central Time today (5:00 Eastern Time). A live audio webcast of the conference call, together with detailed financial information, can be accessed through the company's Investor Relations Web site at http://www.paylocity.com. Participants who choose to call in to the conference call can do so by dialing (855) 226-3021 or (315) 625-6892, passcode 85103183. A replay of the call will be available and archived via webcast at www.paylocity.com.

About Paylocity

Paylocity is a provider of cloud-based payroll and human capital management, or HCM, software solutions for medium-sized organizations. Paylocity's comprehensive and easy-to-use solutions enable its clients to manage their workforces more effectively. Paylocity's solutions help drive strategic human capital decision-making and improve employee engagement by enhancing the human resource, payroll and finance capabilities of its clients. For more information, visit www.paylocity.com.

Non-GAAP Financial MeasuresThe company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA, adjusted gross profit, adjusted recurring gross profit, non-GAAP operating income (loss), non-GAAP net income (loss), non-GAAP net income (loss) per share, non-GAAP sales and marketing, non-GAAP total research and development and non-GAAP general and administrative. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income (loss) before interest expense, income tax expense, and depreciation and amortization expense, adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Adjusted gross profit and adjusted recurring gross profit are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and amortization of capitalized internal-use software costs. Non-GAAP operating income (loss) is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Non-GAAP sales and marketing expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Non-GAAP general and administrative expense is adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Non-GAAP net income (loss) and non-GAAP net income (loss) per share are adjusted to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises and the amortization of acquired intangibles. Pro forma diluted weighted average number of common shares are adjusted for the weighted average effect of potentially diluted shares. Non-GAAP total research and development is adjusted for capitalized internal-use software costs and to eliminate stock-based compensation expense and employer payroll taxes related to stock releases and option exercises. Please note that other companies may define their non-GAAP financial measures differently than we do. Management presents certain non-GAAP financial measures in this release because it considers them to be important supplemental measures of performance. Management uses these non-GAAP financial measures for planning purposes, including analysis of the company's performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management believes that these non-GAAP financial measures provide additional insight for analysts and investors in evaluating the company's financial and operational performance. Management also intends to provide these non-GAAP financial measures as part of the company's future earnings discussions and, therefore, the inclusion of the non-GAAP financial measures should provide consistency in the company's financial reporting. Non-GAAP financial measures have limitations as an analytical tool. Investors are encouraged to review the reconciliation of the non-GAAP measures to their most directly comparable GAAP measures provided in this release.

Safe Harbor/forward looking statementsThis press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included herein regarding Paylocity's future operations, future financial position and performance, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "seek" and similar expressions (or the negative of these terms) are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about management's estimates regarding future revenues and financial performance and other statements about management's beliefs, intentions or goals. Paylocity may not actually achieve the expectations disclosed in the forward-looking statements, and you should not place undue reliance on Paylocity's forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to differ materially from the expectations disclosed in the forward-looking statements, including, but not limited to, risks related to regulatory, legislative and judicial uncertainty in Paylocity's markets, including the potential repeal or replacement of the Affordable Care Act; Paylocity's ability to retain existing clients and to attract new clients to enter into subscriptions for its services; Paylocity's ability to sell new products and retain subscriptions for its existing products, such as ACA Enhanced, to its new and existing clients; the challenges associated with a growing company's ability to effectively service clients in a dynamic and competitive market; challenges associated with expanding and evolving a sales organization to effectively address new geographies and products and services; Paylocity's reliance on and ability to expand its referral network of third parties; difficulties associated with accurately forecasting revenue and appropriately planning expenses; challenges with managing growth effectively; difficulties in forecasting Paylocity's tax position, including but not limited to the assessment of the need for a valuation allowance against its deferred tax position; continued acceptance of SaaS as an effective method for delivery of payroll and HCM solutions; Paylocity's ability to protect and defend its intellectual property; the risk that Paylocity's security measures are compromised or the unauthorized access to customer data; unexpected events in the market for Paylocity's solutions; changes in the competitive environment in Paylocity's industry and the markets in which it operates; adverse changes in general economic or market conditions; changes in the employment rates of Paylocity's clients and the resultant impact on revenue; and other risks and potential factors that could affect Paylocity's business and financial results identified in Paylocity's filings with the Securities and Exchange Commission (the "SEC"), including its 10-K filed with the SEC on August 12, 2016. Additional information will also be set forth in Paylocity's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Paylocity makes with the SEC. These forward-looking statements represent Paylocity's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Paylocity disclaims any obligations to update or alter these forward-looking statements in the future, whether as a result of new information, future events or otherwise.

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Balance Sheets

(in thousands, except per share data)

June 30,

March 31,

Assets

2016

2017

Current assets:

Cash and cash equivalents

$86,496

$101,450

Accounts receivable, net

1,681

2,177

Prepaid expenses and other

7,409

13,094

Total current assets before funds held for clients

95,586

116,721

Funds held for clients

1,239,622

1,170,341

Total current assets

1,335,208

1,287,062

Long-term prepaid expenses

845

1,592

Capitalized internal-use software, net

11,427

16,705

Property and equipment, net

26,787

34,297

Intangible assets, net

10,419

9,277

Goodwill

6,003

6,003

Total assets

$1,390,689

$1,354,936

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$1,621

$1,633

Accrued expenses

24,979

27,136

Total current liabilities before client fund obligations

26,600

28,769

Client fund obligations

1,239,622

1,170,341

Total current liabilities

1,266,222

1,199,110

Deferred rent

4,646

9,601

Deferred income tax liabilities, net

249

376

Total liabilities

$1,271,117

$1,209,087

Stockholders' equity:

Preferred stock, $0.001 par value, 5,000 authorized, no shares issued and outstanding at June 30, 2016 and March 31, 2017

$—

$—

Common stock, $0.001 par value, 155,000 shares authorized at June 30, 2016 and March 31, 2017; 51,132 shares issued and outstanding at June 30, 2016 and 51,489 shares issued and outstanding at March 31, 2017

51

51

Additional paid-in capital

171,515

187,230

Accumulated deficit

(51,994

)

(41,432

)

Total stockholders' equity

$119,572

$145,849

Total liabilities and stockholders' equity

$1,390,689

$1,354,936

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

Three months ended March 31,

Nine months ended March 31,

2016

2017

2016

2017

Revenues:

Recurring fees

$66,279

$85,314

$160,374

$212,581

Interest income on funds held for clients

803

1,041

1,946

2,489

Total recurring revenues

67,082

86,355

162,320

215,070

Implementation services and other

3,488

3,918

8,542

8,879

Total revenues

70,570

90,273

170,862

223,949

Cost of revenues:

Recurring revenues

18,576

22,436

47,858

62,255

Implementation services and other

8,633

9,646

23,646

28,569

Total cost of revenues

27,209

32,082

71,504

90,824

Gross profit

43,361

58,191

99,358

133,125

Operating expenses:

Sales and marketing

17,681

21,242

44,471

56,988

Research and development

6,759

6,969

18,987

21,492

General and administrative

12,720

15,100

34,410

43,915

Total operating expenses

37,160

43,311

97,868

122,395

Operating income

6,201

14,880

1,490

10,730

Other income (expense)

(83

)

(47

)

214

(4

)

Income before income taxes

6,118

14,833

1,704

10,726

Income tax expense (benefit)

(43

)

32

143

164

Net income

$6,161

$14,801

$1,561

$10,562

Net income per share:

Basic

$0.12

$0.29

$0.03

$0.21

Diluted

$0.12

$0.27

$0.03

$0.20

Weighted-average shares used in computing net income per share:

Basic

50,962

51,447

50,865

51,353

Diluted

53,424

54,002

53,431

53,987

Stock-based compensation expense and employer payroll taxes related to stock releases and option exercises are included in the above line items:

Three months ended March 31,

Nine months ended March 31,

2016

2017

2016

2017

Cost of revenue - recurring

$459

$514

$1,317

$1,719

Cost of revenue - implementation services and other

303

373

905

1,094

Sales and marketing

1,205

1,750

3,360

5,044

Research and development

778

831

2,228

2,608

General and administrative

2,029

2,950

5,750

8,798

Total

$4,774

$6,418

$13,560

$19,263

PAYLOCITY HOLDING CORPORATION

Unaudited Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended March 31,

2016

2017

Cash flows from operating activities:

Net income

$1,561

$10,562

Adjustments to reconcile net income to net cash provided by operating activities: